BILL ANALYSIS H.B. 1877 By: Stiles (Sponsor) Finance 05-05-95 Senate Committee Report (Unamended) BACKGROUND Virtually all public institutions of higher education have statutory language allowing the board of regents of the particular institution to delegate certain powers and duties of the board to committees, officers, or employees of the board. The statute of the board of regents of the University of Texas System has been interpreted as not allowing delegatory powers granted to other governing boards. PURPOSE As proposed, H.B. 1877 grants delegatory powers to the board of regents of the University of Texas System. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted under SECTIONS 1 (Sec. 65.31(g), Education Code) and 2 (Sec. 65.34(a), Education Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 65.31, Education Code, by adding Subsection (g), to authorize the board of regents (board) of the University of Texas System (system), by rule, to delegate a power or duty of the board to a committee, officer, employee, or other agent of the board. SECTION 2. Amends Section 64.34, Education Code, to require a contract to be approved by the board or otherwise entered into in accordance with rules of the board relating to contracting authority. SECTION 3. Amends Section 66.08, Education Code, as follows: Sec. 66.08. New heading: INVESTMENT MANAGEMENT. (a) Authorizes the board to delegate investment authority and contract for the investment of the permanent university fund to the same extent as the governing board of an institution of higher education with respect to an institutional fund under Chapter 163, Property Code. (b) Authorizes the board to enter into a contract with a nonprofit corporation for the corporation to invest funds under the control and management of the board, including the permanent university fund, as designated by the board. Prohibits the corporation from engaging in any business other than investing funds designated by the board under the contract. (c) Requires the board to approve the articles of incorporation and bylaws of the corporation and any amendment to the articles of incorporation or bylaws; investment policies of the corporation, including changes to those policies; audit and ethics committee of the corporation; and code of ethics of the corporation. (d) Requires the board of directors of the corporation to have nine members. Requires the board to appoint and remove all members of the board of directors of the corporation. Requires at least three members of the board and the chancellor of the system to be appointed as directors. (e) Requires the board to select one or more of the members of the board of directors of the corporation from a list of candidates with substantial background and expertise in investments that is submitted to the board by the board of the Texas A&M University System. (f) Requires the board to provide for an annual financial audit of the permanent university fund if an investment contract entered into under Subsection (b) includes the permanent university fund within the scope of funds under the control and management of the board to be invested by the corporation. Requires the audit to be performed by the auditors of the system and the Texas A&M University System and presented to the board. (g) Requires the corporation to file quarterly reports with the board concerning matters required by the board. (h) Subjects the corporation to the Texas Non-Profit Corporation Act. (i) Prohibits the corporation from entering into an agreement or transaction with certain persons or entities. (j) Provides that an agreement or transaction entered into in violation of Subsection (i) is void. (k) Sets forth criteria for a person who has an interest in a business entity. (l) Defines "board," "governing board," "institutional fund," "and institution of higher education." SECTION 4. Requires the board of the system to retain an independent accounting firm to perform a financial audit of the permanent university fund before implementing the first contract entered into by it that includes the permanent university fund within the scope of funds under the management and control of the board to be invested by a corporation pursuant to the authority granted by Section 66.08, Education Code, as amended by this Act. SECTION 5. Provides that the invalidity does not affect other provisions or applications of this Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are declared severable if the provision of this Act or its application to any circumstances is held invalid. SECTION 6. Emergency clause. Effective date: upon passage.